Maximizing the Office in Home Deduction: Eligibility, Actual vs. Simplified Method, Recapture, Recent Cases

With more people working from home, questions abound about the home office deduction. This deduction allows taxpayers to expense usually nondeductible costs, including utilities, homeowners' insurance, pest control, and more. Once thought to be an audit trigger, this deduction became mainstream after Commissioner v. Soliman, 506 U.S. 168 (1993).

In 2013, the simplified option for the home office deduction was added, leaving preparers with more to consider. The simplified method allows a $5 deduction per square foot of the home used for business up to a maximum of 300 square feet. Many practitioners opt for this method because it saves substantial tax preparation time. Often though, deducting actual expenses saves the taxpayer substantially more in taxes.

Complications that tax practitioners must address include recapturing depreciation when the home is sold if actual expenses have been deducted, operating more than one business from home, and determining exactly which residential expenses are allowed deductions. Understanding how to maximize this deduction is key for tax advisers working with small businesses.

Listen as our panel of income tax experts explains who is eligible for this tax saving deduction, how the deduction is calculated, what is and is not a qualified expense, and unique considerations surrounding this worthwhile deduction.

1. Home office deduction: an overview
2. Eligibility
3. What constitutes an office?
4. Actual expenses
5. Square footage methods
6. Recapture
7. Recent cases
8. Best practices

The panel will review these and other key issues:

• What is considered a dwelling eligible for the home office deduction?
• When is a taxpayer eligible to deduct home office expenses?
• When could deducting actual expenses be more beneficial for a taxpayer?
• What specific expenses are eligible and not eligible for the home office deduction?
• How have the courts responded in recent home office deduction cases?

Learning Objectives

After completing this course, you will be able to:

• Ascertain what types of transactions require Form 926 reporting.

  Determine the thresholds for Form 926 reporting.

  Differentiate the reporting requirements of Form 926 and FinCEN 114 (FBAR). 

  Identify the penalties for failure to file Forms 926 and FinCEN 114.

  Verify that an outbound transfer meets the guidelines for a nonrecognition exchange.

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years + business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules, supervising other preparers/accountants. Specific knowledge and understanding of Form 926 and FinCEN 114 (FBAR), transactions that trigger Form 926 reporting, property transfers to foreign corporations, nonrecognition transactions; familiarity with transfers or cash and intangibles to foreign corporations and, filing requirements and penalties.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).